##### Table of Contents






SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549




---

FORM 10-Q

(Mark One)



|  |                                                         
|- | --------------------------------------------------------
|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE

SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 2001

or



|  |                                                          
|- | ---------------------------------------------------------
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE

SECURITIES EXCHANGE ACT OF 1934


For the transition period from
                              to

Commission File Number 000-26313

NETWORK PLUS CORP.

(Exact Name of Registrant as Specified in Its
Charter)


|                                                                                          |  |                                               
|----------------------------------------------------------------------------------------- |  | ----------------------------------------------
|Delaware
	(State or Other Jurisdiction of
	Incorporation or Organization)                 |  | 04-3430576
	(IRS Employer
	Identification No.)
|41 Pacella Park Drive, Randolph,
	Massachusetts
	(Address of Principal Executive Officer) |  | 02368
	(Zip Code)                             

(781) 473-2000

(Registrants Telephone Number, Including
Area Code)


(Former Name, Former Address and Former Fiscal
Year,

if Changed Since Last Report)


Indicate by check mark whether the registrant: 
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days.

Yes     x   No     
o

The number of shares of the registrants Common Stock
($0.01 par value) outstanding on November 1, 2001 was
67,139,727.









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TABLE OF CONTENTS



|                                                                                              |                                                                    |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ |  |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION                                                              
|Item 1. Financial Statements                                                                 
|                                                                                              | NETWORK PLUS CORP. CONDENSED CONSOLIDATED BALANCE SHEETS          
|                                                                                              | NETWORK PLUS CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                   
|                                                                                              | NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS    
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|PART II -- OTHER INFORMATION                                                                 
|Item 1. Legal Proceedings                                                                    
|Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                   



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##### Table of Contents



FORM 10-Q

Three Months Ended September 30, 2001


INDEX

|                                                                                                                    |  |                                                                                        |    |        |    | 
|------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------- | -- | ------ | -- | 
|                                                                                                                    |  |                                                                                        |    | Page  
|                                                                                                                    |  |                                                                                        |    | Number
|                                                                                                                    |  |                                                                                        |    |       
|PART I  FINANCIAL
	INFORMATION                                                                                     |  |                                                                                        |    |       
|ITEM  1.                                                                                                            |  | FINANCIAL STATEMENTS                                                                   |    |        |    | 
|NETWORK PLUS CORP.                                                                                                  |  |                                                                                        |    |       
|Unaudited Condensed Consolidated Balance Sheets
	September 30, 2001 and December 31, 2000                           |  |                                                                                        | 2  |       
|Unaudited Condensed Consolidated Statements of
	Operations Three and Nine Months Ended September 30, 2001
	and 2000 |  |                                                                                        | 3  |       
|Unaudited Condensed Consolidated Statements of
	Cash Flows Nine Months Ended September 30, 2001 and 2000            |  |                                                                                        | 4  |       
|Notes to Unaudited Condensed Consolidated
	Financial Statements                                                     |  |                                                                                        | 5  |       
|ITEM  2.                                                                                                            |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
	FINANCIAL CONDITION AND RESULTS OF OPERATIONS |    |        | 11 | 
|ITEM  3.                                                                                                            |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
	MARKET RISK                            |    |        | 17 | 
|PART II  OTHER
	INFORMATION                                                                                        |  |                                                                                        |    |       
|ITEM  1.                                                                                                            |  | LEGAL PROCEEDINGS                                                                      |    |        | 17 | 
|ITEM  6.                                                                                                            |  | EXHIBITS AND REPORTS ON FORM 8-K                                                       |    |        | 18 | 
|SIGNATURES                                                                                                          |  |                                                                                        | 19 |       

1



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##### Table of Contents






PART I  FINANCIAL INFORMATION




Item 1.     Financial
Statements




NETWORK PLUS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                                                                                                                               |                                                                                                                            |                                                                                     |         |              |         |  |         |          |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | ------- | ------------ | ------- |  | ------- | -------- | ------- | 
|                                                                                                                                                                                                                                                               |                                                                                                                            | September 30,                                                                       |         | December 31,
|                                                                                                                                                                                                                                                               |                                                                                                                            | 2001                                                                                |         | 2000        
|                                                                                                                                                                                                                                                               |                                                                                                                            |                                                                                     |         |             
|                                                                                                                                                                                                                                                               |                                                                                                                            |                                                                                    
|                                                                                                                                                                                                                                                               |                                                                                                                            | (In thousands, except                                                              
|                                                                                                                                                                                                                                                               |                                                                                                                            | per share data)                                                                    
|                                                                                                                                                                                                                                                               |                                                                                                                            | (Unaudited)                                                                        
|Assets                                                                                                                                                                                                                                                        
|Current Assets                                                                                                                                                                                                                                                 |                                                                                                                            |                                                                                     |         |              |         |  |         |         
|                                                                                                                                                                                                                                                               | Cash and cash equivalents                                                                                                  |                                                                                     | $       | 4,039        |         |  | $       | 12,474   |        
|                                                                                                                                                                                                                                                               | Accounts receivable, net of allowance for
	doubtful accounts of $5,175 and $3,294, respectively                            |                                                                                     |         | 46,659       |         |  |         | 55,922   |        
|                                                                                                                                                                                                                                                               | Prepaid expenses                                                                                                           |                                                                                     |         | 2,284        |         |  |         | 1,185    |        
|                                                                                                                                                                                                                                                               | Other current assets                                                                                                       |                                                                                     |         | 12,046       |         |  |         | 14,517   |        
|                                                                                                                                                                                                                                                               |                                                                                                                            |                                                                                     |         |              |         |  |         |         
|                                                                                                                                                                                                                                                               |                                                                                                                            | Total current assets                                                                |         |              | 65,028  |  |         |          | 84,098  | 
|Property and equipment, net                                                                                                                                                                                                                                    |                                                                                                                            |                                                                                     | 364,463 |              |         |  | 269,073 |         
|Other assets, net                                                                                                                                                                                                                                              |                                                                                                                            |                                                                                     | 3,748   |              |         |  | 51,488  |         
|                                                                                                                                                                                                                                                               |                                                                                                                            |                                                                                     |         |              |         |  |         |         
|                                                                                                                                                                                                                                                               |                                                                                                                            | Total Assets                                                                        |         | $            | 433,239 |  |         | $        | 404,659 | 
|                                                                                                                                                                                                                                                               |                                                                                                                            |                                                                                     |         |              |         |  |         |         
|Liabilities, Redeemable Convertible Preferred
	Stock and Stockholders Equity                                                                                                                                                                                 
|Current Liabilities                                                                                                                                                                                                                                            |                                                                                                                            |                                                                                     |         |              |         |  |         |         
|                                                                                                                                                                                                                                                               | Accounts payable                                                                                                           |                                                                                     | $       | 34,074       |         |  | $       | 72,231   |        
|                                                                                                                                                                                                                                                               | Accrued liabilities                                                                                                        |                                                                                     |         | 15,979       |         |  |         | 14,979   |        
|                                                                                                                                                                                                                                                               | Current portion of capital lease obligations                                                                               |                                                                                     |         | 12,846       |         |  |         | 17,288   |        
|                                                                                                                                                                                                                                                               | Revolving credit facility (Note 4)                                                                                         |                                                                                     |         | 144,000      |         |  |         |         |        
|                                                                                                                                                                                                                                                               |                                                                                                                            |                                                                                     |         |              |         |  |         |         
|                                                                                                                                                                                                                                                               |                                                                                                                            | Total current liabilities                                                           |         |              | 206,899 |  |         |          | 104,498 | 
|Long-term capital lease obligations                                                                                                                                                                                                                            |                                                                                                                            |                                                                                     | 37,539  |              |         |  | 28,351  |         
|Long-term note payable to stockholder                                                                                                                                                                                                                          |                                                                                                                            |                                                                                     | 1,875   |              |         |  | 1,875   |         
|Other long-term liabilities                                                                                                                                                                                                                                    |                                                                                                                            |                                                                                     | 4,629   |              |         |  | 2,815   |         
|Commitments                                                                                                                                                                                                                                                    |                                                                                                                            |                                                                                     |         |              |         |  |         |         
|Preferred stock, $0.01 par value, 1,000 shares
	authorized: Redeemable Series A Cumulative Convertible
	Preferred Stock, 500 shares authorized: 250 shares issued and
	outstanding, (aggregate liquidation preference of $126,857 and
	$127,566, respectively) |                                                                                                                            |                                                                                     | 120,393 |              |         |  | 120,065 |         
|Stockholders Equity                                                                                                                                                                                                                                           |                                                                                                                            |                                                                                     |         |              |         |  |         |         
|                                                                                                                                                                                                                                                               | Common stock, $0.01 par value, 150,000 shares
	authorized, 67,140 and 61,810 shares, issued and outstanding,
	respectively |                                                                                     |         | 671          |         |  |         | 618      |        
|                                                                                                                                                                                                                                                               | Additional paid-in capital                                                                                                 |                                                                                     |         | 274,011      |         |  |         | 271,399  |        
|                                                                                                                                                                                                                                                               | Stock subscription receivable                                                                                              |                                                                                     |         | (167         | )       |  |         | (176     | )      
|                                                                                                                                                                                                                                                               | Warrants                                                                                                                   |                                                                                     |         | 15,862       |         |  |         | 15,634   |        
|                                                                                                                                                                                                                                                               | Comprehensive loss                                                                                                         |                                                                                     |         | (198         | )       |  |         |         |        
|                                                                                                                                                                                                                                                               | Accumulated deficit                                                                                                        |                                                                                     |         | (228,275     | )       |  |         | (140,420 | )      
|                                                                                                                                                                                                                                                               |                                                                                                                            |                                                                                     |         |              |         |  |         |         
|                                                                                                                                                                                                                                                               |                                                                                                                            | Total stockholders equity                                                          |         |              | 61,904  |  |         |          | 147,055 | 
|                                                                                                                                                                                                                                                               |                                                                                                                            |                                                                                     |         |              |         |  |         |         
|                                                                                                                                                                                                                                                               |                                                                                                                            | Total Liabilities, Redeemable Convertible
	Preferred Stock and Stockholders Equity |         | $            | 433,239 |  |         | $        | 404,659 | 
|                                                                                                                                                                                                                                                               |                                                                                                                            |                                                                                     |         |              |         |  |         |         

The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.

2



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NETWORK PLUS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                           |                                              |                                       |         |                   |   |      |         |        |   |   |         |         |   |   |         |         |  
|-------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------- | ------- | ----------------- | - | ---- | ------- | ------ | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                           |                                              |                                       |         |                  
|                                                                           |                                              | Three Months Ended                    |         | Nine Months Ended
|                                                                           |                                              | September 30,                         |         | September 30,    
|                                                                           |                                              |                                       |         |                  
|                                                                           |                                              | 2001                                  |         | 2000              |   | 2001 |         | 2000  
|                                                                           |                                              |                                       |         |                   |   |      |         |       
|                                                                           |                                              |                                      
|                                                                           |                                              | (In thousands, except per share data)
|                                                                           |                                              |                                      
|                                                                           |                                              | (Unaudited)                          
|Revenues                                                                   |                                              | $                                     | 76,284  |                   |   | $    | 62,158  |        |   | $ | 224,528 |         |   | $ | 166,844 |        
|Operating expenses                                                         |                                              |                                       |         |                   |   |      |         |        |   |   |         |         |   |   |         |        
|                                                                           | Costs of services                            |                                       |         | 47,926            |   |      |         | 48,528 |   |   |         | 152,826 |   |   |         | 130,944 |  
|                                                                           | Selling, general and administrative expenses |                                       |         | 28,196            |   |      |         | 27,443 |   |   |         | 85,996  |   |   |         | 74,986  |  
|                                                                           | Depreciation and amortization                |                                       |         | 20,195            |   |      |         | 7,780  |   |   |         | 51,805  |   |   |         | 19,089  |  
|                                                                           |                                              |                                       |         |                   |   |      |         |        |   |   |         |         |   |   |         |        
|                                                                           |                                              |                                       | 96,317  |                   |   |      | 83,751  |        |   |   | 290,627 |         |   |   | 225,019 |        
|                                                                           |                                              |                                       |         |                   |   |      |         |        |   |   |         |         |   |   |         |        
|Operating loss                                                             |                                              |                                       | (20,033 | )                 |   |      | (21,593 | )      |   |   | (66,099 | )       |   |   | (58,175 | )      
|Other income (expense)                                                     |                                              |                                       |         |                   |   |      |         |        |   |   |         |         |   |   |         |        
|                                                                           | Interest income                              |                                       |         | 133               |   |      |         | 1,992  |   |   |         | 438     |   |   |         | 5,034   |  
|                                                                           | Interest expense                             |                                       |         | (8,827            | ) |      |         | (947   | ) |   |         | (22,133 | ) |   |         | (3,559  | )
|                                                                           | Other expense                                |                                       |         | (58               | ) |      |         | (176   | ) |   |         | (61     | ) |   |         | (158    | )
|                                                                           |                                              |                                       |         |                   |   |      |         |        |   |   |         |         |   |   |         |        
|                                                                           |                                              |                                       | (8,752  | )                 |   |      | 869     |        |   |   | (21,756 | )       |   |   | 1,317   |        
|                                                                           |                                              |                                       |         |                   |   |      |         |        |   |   |         |         |   |   |         |        
|Net loss                                                                   |                                              |                                       | (28,785 | )                 |   |      | (20,724 | )      |   |   | (87,855 | )       |   |   | (56,858 | )      
|Preferred stock dividends and accretion of
	offering expenses and discount |                                              |                                       | 1,857   |                   |   |      | 2,576   |        |   |   | 7,310   |         |   |   | 4,838   |        
|                                                                           |                                              |                                       |         |                   |   |      |         |        |   |   |         |         |   |   |         |        
|Net loss applicable to common stockholders                                 |                                              | $                                     | (30,642 | )                 |   | $    | (23,300 | )      |   | $ | (95,165 | )       |   | $ | (61,696 | )      
|                                                                           |                                              |                                       |         |                   |   |      |         |        |   |   |         |         |   |   |         |        
|Net loss per share applicable to common
	stockholders  basic and diluted  |                                              | $                                     | (0.47   | )                 |   | $    | (0.39   | )      |   | $ | (1.48   | )       |   | $ | (1.06   | )      
|                                                                           |                                              |                                       |         |                   |   |      |         |        |   |   |         |         |   |   |         |        
|Weighted average shares outstanding 
	basic and diluted                   |                                              |                                       | 65,675  |                   |   |      | 60,428  |        |   |   | 64,466  |         |   |   | 58,287  |        
|                                                                           |                                              |                                       |         |                   |   |      |         |        |   |   |         |         |   |   |         |        

The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.

3



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NETWORK PLUS CORP.






CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                 |                                                                                 |                                                 |                                           |         |         |          |        |          |         |          |  
|------------------------------------------------ | ------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------- | ------- | ------- | -------- | ------ | -------- | ------- | -------- | -
|                                                 |                                                                                 |                                                
|                                                 |                                                                                 | Nine Months Ended                              
|                                                 |                                                                                 | September 30,                                  
|                                                 |                                                                                 |                                                
|                                                 |                                                                                 | 2001                                            |                                           | 2000   
|                                                 |                                                                                 |                                                 |                                           |        
|                                                 |                                                                                 |                                                
|                                                 |                                                                                 | (In thousands)                                 
|                                                 |                                                                                 |                                                
|                                                 |                                                                                 | (Unaudited)                                    
|Cash flows from operating activities:            |                                                                                 |                                                 |                                           |         |         |          |        |         
|                                                 | Net loss                                                                        |                                                 | $                                         | (87,855 | )       |          | $      | (56,858  | )      
|                                                 | Adjustments to reconcile net income to net cash
	used for operating activities: |                                                 |                                           |         |         |          |        |          |        
|                                                 |                                                                                 | Depreciation and amortization                   |                                           |         | 51,805  |          |        |          | 19,089  |         
|                                                 |                                                                                 | Amortization of debt issuance costs             |                                           |         | 9,868   |          |        |          |        |         
|                                                 |                                                                                 | Loss on disposal of fixed assets                |                                           |         | 71      |          |        |          | 94      |         
|                                                 |                                                                                 | Interest payable on note payable to stockholder |                                           |         | 135     |          |        |          | 147     |         
|                                                 |                                                                                 | Stock-based compensation                        |                                           |         |        |          |        |          | 101     |         
|                                                 | Changes in assets and liabilities:                                              |                                                 |                                           |         |         |          |        |          |        
|                                                 |                                                                                 | Accounts receivable                             |                                           |         | 9,263   |          |        |          | (20,545 | )       
|                                                 |                                                                                 | Prepaid expenses                                |                                           |         | (1,099  | )        |        |          | (835    | )       
|                                                 |                                                                                 | Other current assets                            |                                           |         | 1,256   |          |        |          | (1,492  | )       
|                                                 |                                                                                 | Other assets                                    |                                           |         | 873     |          |        |          | (292    | )       
|                                                 |                                                                                 | Accounts payable                                |                                           |         | (23,657 | )        |        |          | 4,273   |         
|                                                 |                                                                                 | Accrued liabilities                             |                                           |         | 802     |          |        |          | 7,647   |         
|                                                 |                                                                                 | Other liabilities                               |                                           |         | 1,679   |          |        |          | 1,079   |         
|                                                 |                                                                                 |                                                 |                                           |         |         |          |        |         
|                                                 |                                                                                 |                                                 | Net cash used for operating activities    |         |         | (36,859  | )      |          |         | (47,592  | )
|Cash flows from investing activities:            |                                                                                 |                                                 |                                           |         |         |          |        |         
|                                                 | Capital expenditures                                                            |                                                 |                                           | (91,817 | )       |          |        | (156,678 | )      
|                                                 | Purchase of fiber capacity                                                      |                                                 |                                           | (14,500 | )       |          |        |         |        
|                                                 |                                                                                 |                                                 |                                           |         |         |          |        |         
|                                                 |                                                                                 |                                                 | Net cash used for investing activities    |         |         | (106,317 | )      |          |         | (156,678 | )
|Cash flows from financing activities:            |                                                                                 |                                                 |                                           |         |         |          |        |         
|                                                 | Net proceeds from revolving credit facility                                     |                                                 |                                           | 144,000 |         |          |        |         |        
|                                                 | Cost incurred in connection with debt facility                                  |                                                 |                                           |        |         |          |        | (5,998   | )      
|                                                 | Principal payments on capital lease obligations                                 |                                                 |                                           | (11,701 | )       |          |        | (9,405   | )      
|                                                 | Net proceeds from issuance of common stock                                      |                                                 |                                           | 2,442   |         |          |        | 128,651  |        
|                                                 | Net proceeds from issuance of preferred stock                                   |                                                 |                                           |        |         |          |        | 119,750  |        
|                                                 |                                                                                 |                                                 |                                           |         |         |          |        |         
|                                                 |                                                                                 |                                                 | Net cash provided by financing activities |         |         | 134,741  |        |          |         | 232,998  |  
|                                                 |                                                                                 |                                                 |                                           |         |         |          |        |         
|Net decrease in cash                             |                                                                                 |                                                 | (8,435                                    | )       |         |          | 28,728 |         
|Cash and cash equivalents at beginning of period |                                                                                 |                                                 | 12,474                                    |         |         |          | 43,031 |         
|                                                 |                                                                                 |                                                 |                                           |         |         |          |        |         
|Cash and cash equivalents at end of period       |                                                                                 | $                                               | 4,039                                     |         |         | $        | 71,759 |         
|                                                 |                                                                                 |                                                 |                                           |         |         |          |        |         
|Noncash investing and financing activities:      |                                                                                 |                                                 |                                           |         |         |          |        |         
|                                                 | Fixed assets acquired under capital leases                                      |                                                 | $                                         | 16,447  |         |          | $      | 14,853   |        
|                                                 |                                                                                 |                                                 |                                           |         |         |          |        |         
|                                                 | Dividends recorded on preferred stock,                                          |                                                 |                                           |         |         |          |        |          |        
|                                                 | Paid in common stock                                                            |                                                 | $                                         | 7,310   |         |          | $      | 4,838    |        
|                                                 |                                                                                 |                                                 |                                           |         |         |          |        |         

The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.

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NETWORK PLUS CORP.






NOTES TO UNAUDITED CONDENSED CONSOLIDATED


FINANCIAL STATEMENTS


(In thousands, except per share data)


1.     Basis of Presentation

The accompanying condensed consolidated financial statements of
Network Plus Corp. (the Company) are unaudited and
have been prepared in accordance with accounting principles
generally accepted in the United States of America
(GAAP) for interim financial information and with
the instructions to Form 10-Q and Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In
the opinion of management, all normal, recurring adjustments
considered necessary for a fair presentation have been included.
The balance sheet data as of December 31, 2000 has been
derived from the Companys audited consolidated financial
statements.

These financial statements should be read in conjunction with
the audited consolidated financial statements and footnotes
thereto included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2000.
Interim results of operations are not necessarily indicative of
the results to be expected for the full year or any other
interim periods.

Certain amounts in the financial statements for the prior year
have been reclassified to conform with the current year
presentation. Such reclassifications had no effect on previously
reported results of operations.

2.     Property and Equipment

|                                               |  |                                           |                |               |        |              |         |   |        |   |         |  
|---------------------------------------------- |  | ----------------------------------------- | -------------- | ------------- | ------ | ------------ | ------- | - | ------ | - | ------- | -
|                                               |  | Estimate                                  |                | September 30, |        | December 31,
|                                               |  | Useful Life                               |                | 2001          |        | 2000        
|                                               |  |                                           |                |               |        |             
|Network infrastructure and equipment           |  |                                           | 5 and 10 years |               |        | $            | 283,742 |   |        | $ | 162,665 |  
|Computer equipment                             |  |                                           | 3-5 years      |               |        |              | 19,072  |   |        |   | 14,665  |  
|Office furniture and equipment                 |  |                                           | 7 years        |               |        |              | 5,051   |   |        |   | 3,783   |  
|Software                                       |  |                                           | 3 years        |               |        |              | 21,375  |   |        |   | 15,496  |  
|Motor vehicles                                 |  |                                           | 5 years        |               |        |              | 1,229   |   |        |   | 947     |  
|Leasehold improvements                         |  | Shorter of term of lease or life of asset |                |               | 61,642 |              |         |   | 28,684 |  
|Construction in progress                       |  |                                           |                |               |        |              | 61,966  |   |        |   | 81,068  |  
|                                               |  |                                           |                |               |        |              |         |   |        |   |         |  
|                                               |  |                                           |                |               |        |              | 454,077 |   |        |   | 307,308 |  
|Less accumulated depreciation and amortization |  |                                           |                |               |        |              | (89,614 | ) |        |   | (38,235 | )
|                                               |  |                                           |                |               |        |              |         |   |        |   |         |  
|                                               |  |                                           |                |               |        | $            | 364,463 |   |        | $ | 269,073 |  
|                                               |  |                                           |                |               |        |              |         |   |        |   |         |  

Depreciation and amortization expense related to property and
equipment for the three months and nine months ended
September 30, 2001 amounted to $20,053 and $51,379,
respectively. Depreciation and amortization expense related to
property and equipment for the three months and nine months
ended September 30, 2000 amounted to $7,328 and $17,320,
respectively.

5



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NETWORK PLUS CORP.




NOTES TO UNAUDITED CONDENSED CONSOLIDATED


FINANCIAL STATEMENTS  (Continued)


3.     Other Assets

Other assets consist of the following:

|                         |  |               |       |              |  |   |        | 
|------------------------ |  | ------------- | ----- | ------------ |  | - | ------ | 
|                         |  | September 30, |       | December 31,
|                         |  | 2001          |       | 2000        
|                         |  |               |       |             
|Prepaid fiber capacity   |  | $             |      |              |  | $ | 39,707 | 
|Debt issuance costs, net |  |               |      |              |  |   | 9,164  | 
|Rent deposits            |  |               | 1,242 |              |  |   | 1,218  | 
|Intangible assets, net   |  |               | 645   |              |  |   | 1,071  | 
|Other deposits           |  |               | 1,861 |              |  |   | 328    | 
|                         |  |               |       |              |  |   |        | 
|                         |  | $             | 3,748 |              |  | $ | 51,488 | 
|                         |  |               |       |              |  |   |        | 

Prepaid fiber capacity relates to payments made for long-haul
transport capacity. These fees were paid by the Company in
exchange for a 20 year indefeasible right to use
pre-determined fiber routes connecting the northeastern and
southeastern regional networks. In September 2001, the Company
amended the fiber capacity agreement to eliminate the option to
change the pre-determined routes, and accordingly reclassified
the net present value of the fiber capacity to property and
equipment. During the nine months ended September 30, 2001
prepaid fiber capacity fees amortized to operations totalled
$1,133.

Amortization expense related to intangible assets was $142 and
$426 for the three and nine months ended September 30,
2001, respectively. Amortization expenses for the same period in
the prior year was $452 and $1,769, respectively.

4.     Revolving Credit Agreement

Management is in the process of restructuring the Senior Secured
Credit Facility as amended (the Credit Facility),
which currently matures in June 2002, with the existing
lenders. It is expected that the facility will be structured to
extend the term of the principal repayments on a long-term
basis. In accordance with Statement of Financial Accounting
Standards No. 6 (SFAS 6),
Classification of Short-term Obligations Expected to Be
Refinanced, the outstanding principal of the Credit
Facility is required to be presented as a current liability. The
Company expects the restructuring to be completed by the end of
fiscal 2001, at which time the facility will be classified as a
long-term liability.

On September 27, 2000, the Company entered into the Credit
Facility with various lenders allowing for maximum borrowings of
$225,000. Borrowings at September 30, 2001 totaled
$144,000. Subsequent to September 30, 2001 through
November 1, 2001, the Company has borrowed an additional
$16,000 under the Credit Facility. The Credit Facility matures
on June 30, 2002, when all unpaid borrowings become due.
Based on the terms of this agreement, the Company is subject to
various covenants, including the maintenance of certain
financial and operating ratios. The Company is required to
maintain pre-established levels of revenue, earnings before
interest, taxes, depreciation, and amortization
(EBITDA), days sales outstanding (DSO)
and access lines, as defined by the agreement. Additionally, the
Company is restricted as to the level of capital assets it may
acquire within any given quarter and is restricted from paying
cash dividends. Failure to comply with the restriction and
covenant obligations under the Credit Facility could result in a
default. The lenders have a right, under events of default, and
an event deemed by the lenders to be an adverse change in the
Companys business, to terminate future borrowings under
the Credit Facility and require accelerated repayment of
outstanding borrowings.

Effective as of July 19, 2001 and August 10, 2001, a
Second and Third Amendment were made to the Credit Facility.
Included in the Second and Third Amendments were provisions
adjusting the EBITDA

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NETWORK PLUS CORP.




NOTES TO UNAUDITED CONDENSED CONSOLIDATED


FINANCIAL STATEMENTS  (Continued)


requirement for the fiscal quarter ending September 30,
2001 and a waiver of the revenue covenants for the fiscal
quarters ending June 30, 2001, September 30, 2001 and
December 31, 2001, so long as the Company meets specified
alternative revenue requirements during each of these fiscal
quarters. These waivers expire on January 1, 2002. If these
amendments were not made, the Company would not have been in
compliance with the financial covenants under the Credit
Facility during the fiscal quarters ended June 30, 2001 and
September 30, 2001. In addition, the Third Amendment limits
the maximum borrowings available to the sum of the lesser of
(A)(i) 80% of eligible receivables, (ii) 70% of
eligible unbilled accounts and (iii) eligible net property
or (B) (i) $155,000 until five business days following
delivery by the Company to the lenders of financial statements
for the quarter ended September 30, 2001, and
(ii) thereafter maximum borrowings available under the
Credit Facility are $175,000 until December 31, 2001,
$210,000 until March 31, 2002 and $225,000 until
June 30, 2002.

In connection with the Credit Facility, the Company issued
warrants entitling the holders to purchase in aggregate 3,854
shares of the Companys common stock at an exercise price
of $7.01 per share. Upon entering the Credit Facility, 72.73% of
the warrants were exercisable, with 13.64% exercisable on a pro
rata basis with each amount drawn by the Company on the first
$100,000 of loans under the Credit Facility, and the remaining
13.63% exercisable at any time on or after the date the amount
drawn by the Company under the Credit Facility exceeds $100,000.
Since borrowings at June 30, 2001 exceeded $100,000, all of
the unexercisable warrants became exercisable. These warrants
were valued using a Black-Scholes valuation model assuming an
interest rate of 5.83%, volatility of 93%, no dividends, and an
estimated life of 3 years. The $15,043 value assigned to
these warrants along with $6,701 of other issuance costs is
included in debt issuance costs and is being accreted to
interest expense on a straight-line basis through the maturity
date. At September 30, 2001, $10,664 of unamortized debt
issuance costs remains in other current assets. In connection
with the Third Amendment to the Credit Facility, the exercise
price of these warrants was reduced to $2.80 per share as of the
date on which the aggregate amount of all outstanding loans
under the Credit Facility exceed $165,000. The repricing of
these warrants resulted in an increase in the warrant value by
$788. The increase in this value is included in debt issuance
costs.

Along with the Credit Facility, the Company has also entered
into a pledge and security agreement, pledging substantially all
of the Companys assets to the lenders as collateral.

5.     Interest Rate Swap
Agreement

In September 2001, the Company entered into an interest rate
swap agreement to manage its exposure to interest rate movements
by effectively converting a portion of its debt from variable to
fixed rates. The maturity date of the interest rate swap
agreement matches that of the underlying debt arrangement. This
agreement, which matures on June 30, 2002, involves the
exchange of variable rate payments for fixed rate payments
without the exchange of the underlying principal amounts. The
fixed rate, set at 3.78%, is based on three-month U.S. dollar
LIBOR rates. The differential between variable and fixed rates
to be paid or received is accrued as interest rates change in
accordance with the agreement and recognized over the life of
the agreement as an adjustment to interest expense. The
notational principal amount of the interest rate swap agreement
outstanding was $5,000 at September 30, 2001, increasing
monthly in $5,000 increments until reaching a maximum of
$25,000. The interest rate swap agreement is considered to be
perfectly effective in offsetting the change in value of the
interest payments hedged. Any changes in fair value relating to
the interest rate swap agreement are deferred in
stockholders equity (as a component of comprehensive loss)
and recorded in the consolidated balance sheet. At
September 30, 2001, the fair value of this interest rate
swap agreement, which represents the amount the Company would
receive or pay to terminate the agreement, is not material,
based on dealer quotes.

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NETWORK PLUS CORP.




NOTES TO UNAUDITED CONDENSED CONSOLIDATED


FINANCIAL STATEMENTS  (Continued)


The cash requirement of the interest rate swap agreement
approximates its fair value. Cash flows associated with the
interest rate swap agreement are classified consistent with the
cash flows from the transactions being hedged.

Derivative financial instruments involve, to a varying degree,
elements of market and credit risk not recognized in the
consolidated financial statements. The market risk associated
with these instruments resulting from interest rate movements is
expected to offset the market risk of the underlying liabilities
being hedged. The counterparty consists of a major financial
institution with high credit rating. The Company does not
believe that there is a significant risk of nonperformance by
the counterparty because the Company continually monitors the
credit ratings of such counterparty and limits the financial
exposure and the amount of agreements entered into with any such
financial institution. While the contract or notional amounts of
derivative financial instruments provide one measure of the
volume of these transactions, they do not represent the amount
of the Companys exposure to credit risk. The amounts
potentially subject to credit risk (arising from the possible
inability of the counterparty to meet the terms of its
contracts) are generally limited to the amounts, if any, by
which the counterpartys obligation under the contract
exceeds the obligation of the Company to the counterparty.

6.     Comprehensive Income

Comprehensive income for the three and nine months ended
September 30, 2001 and 2000 is as follows:

|                   |                                                       |                    |         |                   |   |      |         |      |   |   |         |      |   |   |         |        |  
|------------------ | ----------------------------------------------------- | ------------------ | ------- | ----------------- | - | ---- | ------- | ---- | - | - | ------- | ---- | - | - | ------- | ------ | -
|                   |                                                       |                    |         |                  
|                   |                                                       | Three Months Ended |         | Nine Months Ended
|                   |                                                       | September 30,      |         | September 30,    
|                   |                                                       |                    |         |                  
|                   |                                                       | 2001               |         | 2000              |   | 2001 |         | 2000
|                   |                                                       |                    |         |                   |   |      |         |     
|Net loss           |                                                       | $                  | (28,785 | )                 |   | $    | (20,724 | )    |   | $ | (87,855 | )    |   | $ | (56,858 | )     
|                   | Unrealized loss on investment securities, net of
	tax |                    |         |                  |   |      |         | (321 | ) |   |         |     |   |   |         | (2,100 | )
|                   | Change in fair value of interest rate agreement       |                    |         | (198              | ) |      |         |     |   |   |         | (198 | ) |   |         |       |  
|                   |                                                       |                    |         |                   |   |      |         |      |   |   |         |      |   |   |         |       
|Comprehensive loss |                                                       | $                  | (28,983 | )                 |   | $    | (21,045 | )    |   | $ | (88,053 | )    |   | $ | (58,958 | )     
|                   |                                                       |                    |         |                   |   |      |         |      |   |   |         |      |   |   |         |       

7.     Net Loss Per Share

The computations of basic and diluted earnings per common share
are based upon the weighted average number of common shares
outstanding and potentially dilutive securities. Potentially
dilutive securities for the Company include warrants, stock
options and redeemable convertible preferred stock.

The following table sets forth the computation of basic and
diluted loss per share:

|                                                                          |  |                    |         |                   |  |      |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------- |  | ------------------ | ------- | ----------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                          |  |                    |         |                  
|                                                                          |  | Three Months Ended |         | Nine Months Ended
|                                                                          |  | September 30,      |         | September 30,    
|                                                                          |  |                    |         |                  
|                                                                          |  | 2001               |         | 2000              |  | 2001 |         | 2000
|                                                                          |  |                    |         |                   |  |      |         |     
|Net loss applicable to common stockholders                                |  | $                  | (30,642 | )                 |  | $    | (23,300 | )    |  | $ | (95,165 | ) |  | $ | (61,696 | )
|Shares used in net loss per share 
	basic and diluted                    |  |                    | 65,675  |                   |  |      | 60,428  |      |  |   | 64,466  |   |  |   | 58,287  |  
|                                                                          |  |                    |         |                   |  |      |         |      |  |   |         |   |  |   |         |  
|Net loss per share applicable to common
	stockholders  basic and diluted |  | $                  | (0.47   | )                 |  | $    | (0.39   | )    |  | $ | (1.48   | ) |  | $ | (1.06   | )
|                                                                          |  |                    |         |                   |  |      |         |      |  |   |         |   |  |   |         |  

Warrants for the purchase of 3,862 and 4,041 shares and stock
options for the purchase of 7,134 and 5,122 shares of common
stock were not included in the computation of net loss per share
for the three months and nine months ended September 30,
2001 and 2000, respectively, because inclusion of these shares
would have

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NETWORK PLUS CORP.




NOTES TO UNAUDITED CONDENSED CONSOLIDATED


FINANCIAL STATEMENTS  (Continued)


an anti-dilutive effect. In addition, shares of redeemable
convertible preferred stock which are convertible into an
aggregate of 3,645 shares of common stock were not included in
the computation of net loss per share for the three months and
nine months ended September 30, 2001 because inclusion of
these shares would have an anti-dilutive effect on net loss per
share.

8.     Recent Accounting
Pronouncement

In June 2001, the FASB issued SFAS No. 142, Goodwill
and Other Intangible Assets effective January 1,
2002. SFAS 142 requires, among other things, the cessation of
the amortization of goodwill. In addition, the standard includes
provisions for the reclassification of certain existing
recognized intangibles as goodwill, reassessment of the useful
lives of existing recognized intangibles, reclassification of
certain intangibles out of previously reported goodwill and the
identification of reporting units for purposes of assessing
potential future impairments of goodwill. SFAS 142 also requires
the Company to complete a transitional goodwill impairment test
six months from the date of adoption. The Company is required to
adopt SFAS 142 for fiscal periods beginning subsequent to
December 15, 2001. The Company is currently assessing the
impact of this new statement on its consolidated financial
position and results of operations and has not yet determined
the impact of its adoption.

In October 2001, the FASB issued SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets effective January 1, 2002. SFAS 144
supersedes SFAS 121, Accounting for the Impairment of
Long-Lived Assets to be Disposed Of and provides a single
accounting model for long-lived assets to be disposed of. The
Company is currently assessing the impact of this new statement
on its consolidated financial position and results of operations
and has not yet determined the impact of its adoption.

9.     Segment Information

The Company has two reportable segments which management
operates as distinct sales organizations. These two segments are
segregated by type of customer base to whom services are
provided. The two customer base types are: retail
telecommunications and data services, and wholesale
telecommunications services. The Company measures and evaluates
its two reportable segments based on revenues and costs of
services. The retail telecommunications and data services
segment provides local and long distance voice services, high
speed data, Internet, web server and managed server hosting.
This segment focuses on selling these services primarily to end
user customers. The wholesale telecommunications segment
provides transport and termination services. This segment
focuses on selling these services to large communication
carriers, who utilize the Companys excess capacity to
provide telephone voice services to their customers.

|                        |                                             |                    |        |                   |  |      |        |        |  |   |         |         |  |   |         |         | 
|----------------------- | ------------------------------------------- | ------------------ | ------ | ----------------- |  | ---- | ------ | ------ |  | - | ------- | ------- |  | - | ------- | ------- | 
|                        |                                             |                    |        |                  
|                        |                                             | Three Months Ended |        | Nine Months Ended
|                        |                                             | September 30,      |        | September 30,    
|                        |                                             |                    |        |                  
|                        |                                             | 2001               |        | 2000              |  | 2001 |        | 2000  
|                        |                                             |                    |        |                   |  |      |        |       
|Revenue:                |                                             |                    |        |                   |  |      |        |        |  |   |         |         |  |   |         |        
|                        | Retail telecommunications and data services |                    | $      | 62,266            |  |      | $      | 39,983 |  |   | $       | 177,649 |  |   | $       | 102,979 | 
|                        | Wholesale telecommunications                |                    |        | 14,018            |  |      |        | 22,175 |  |   |         | 46,879  |  |   |         | 63,865  | 
|                        |                                             |                    |        |                   |  |      |        |        |  |   |         |         |  |   |         |        
|Total revenues          |                                             | $                  | 76,284 |                   |  | $    | 62,158 |        |  | $ | 224,528 |         |  | $ | 166,844 |        
|                        |                                             |                    |        |                   |  |      |        |        |  |   |         |         |  |   |         |        
|Costs of services:      |                                             |                    |        |                   |  |      |        |        |  |   |         |         |  |   |         |        
|                        | Retail telecommunications and data services |                    | $      | 33,651            |  |      | $      | 26,405 |  |   | $       | 103,419 |  |   | $       | 69,361  | 
|                        | Wholesale telecommunications                |                    |        | 14,275            |  |      |        | 22,123 |  |   |         | 49,407  |  |   |         | 61,583  | 
|                        |                                             |                    |        |                   |  |      |        |        |  |   |         |         |  |   |         |        
|Total costs of services |                                             | $                  | 47,926 |                   |  | $    | 48,528 |        |  | $ | 152,826 |         |  | $ | 130,944 |        
|                        |                                             |                    |        |                   |  |      |        |        |  |   |         |         |  |   |         |        

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NETWORK PLUS CORP.




NOTES TO UNAUDITED CONDENSED CONSOLIDATED


FINANCIAL STATEMENTS  (Continued)


10.     Events of September 11,
2001

The Company had a sales office located in the World Trade Center
and suffered the loss of that facility as a result of the events
of September 11, 2001. Employees have been relocated to
various facilities throughout New York and New Jersey. The
Company anticipates that substantially all of the loss will be
covered under insurance policies of the Company.

10



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##### Table of Contents






Item 2.     Managements
Discussion and Analysis of Financial Condition and Results of
Operations

Introduction

The following discussion should be read in conjunction with the
unaudited condensed consolidated financial statements and
related notes of Network Plus Corp. (the Company,
we or us) included herein as well as the
consolidated financial statements and notes and
Managements Discussion and Analysis of Financial Condition
and Results of Operations included in the Companys Annual
Report on Form 10-K for the fiscal year ended
December 31, 2000. In addition to historical information,
the following discussion and other information in this report
contains forward-looking information that involves risks and
uncertainties. For this purpose, any statement that is not a
statement of historical fact is forward-looking information,
including without limitation statements concerning the
Companys future capital requirements, future financial
results, sufficiency of available capital and availability of
additional financing. Without limiting the generality of the
foregoing, words such as believes,
anticipates, expects and similar
expressions identify forward-looking statements. The
Companys actual results could differ materially from those
anticipated by such forward-looking information due to the
factors discussed in the Companys Annual Report on
Form 10-K for the year ended December 31, 2000 and
below under Certain Factors That May Affect Future
Operating Results.

Overview

Network Plus, founded in 1990, is a network-based communications
provider offering a comprehensive suite of telecommunications,
broadband data and Internet Data Center hosting services. The
Companys services include local and long distance voice,
high-speed data, Internet and web server and managed server
hosting. The Company provides local and long distance services
using traditional switched access, ATM and other technologies.
The Company currently serves primarily small and medium-sized
business customers located in the northeastern and southeastern
regions of the United States.

Results of Operations

The following table sets forth for the periods indicated certain
financial data as a percentage of revenues:

|                                    |  |               |     |               |  |      |     |      |  |  |     |    |  |  |     |   
|----------------------------------- |  | ------------- | --- | ------------- |  | ---- | --- | ---- |  |  | --- | -- |  |  | --- | --
|                                    |  |               |     |              
|                                    |  | Three Months  |     | Nine Months  
|                                    |  | Ended         |     | Ended        
|                                    |  | September 30, |     | September 30,
|                                    |  |               |     |              
|                                    |  | 2001          |     | 2000          |  | 2001 |     | 2000
|                                    |  |               |     |               |  |      |     |     
|Revenues                            |  |               | 100 | %             |  |      | 100 | %    |  |  | 100 | %  |  |  | 100 | % 
|Costs of services                   |  |               | 63  |               |  |      | 78  |      |  |  | 68  |    |  |  | 78  |   
|Selling, general and administrative |  |               | 37  |               |  |      | 44  |      |  |  | 38  |    |  |  | 45  |   
|Depreciation and amortization       |  |               | 26  |               |  |      | 13  |      |  |  | 23  |    |  |  | 11  |   
|Operating loss                      |  |               | (26 | )             |  |      | (35 | )    |  |  | (29 | )  |  |  | (35 | ) 
|Other income (expense)              |  |               | (11 | )             |  |      | 1   |      |  |  | (10 | )  |  |  | 1   |   
|Net loss                            |  |               | (38 | )%            |  |      | (33 | )%   |  |  | (39 | )% |  |  | (34 | )%



| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Three and Nine Months Ended September 30, 2001
	Compared to Three and Nine Months Ended

September 30, 2000


Revenues. Total revenues increased $14.1 million or
23% to $76.3 million for the three months ended
September 30, 2001 from $62.2 million for the same
period in the prior year. Revenues from local and data services
represented 60% of total revenues or $45.5 million for the
three month period ended September 30, 2001 as compared to
39% of total revenues or $24.3 million for the same period
in the prior year. Revenues from long distance services, which
include retail and international wholesale services, represented
$30.8 million or 40% of total revenues for the three months
ended September 30, 2001, a decrease from
$37.9 million or 61% of total revenues for the same period
in the prior year. Total revenues for the nine month period
ended September 30, 2001 increased $57.7 million or
35% to $224.5 million from $166.8 million for the same
period in the prior year. Revenues from local and data services
for the nine month period ended September 30, 2001

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##### Table of Contents





Approximately one half of the increase in total revenues for the
three months ended September 30, 2001 was due to the
$14.4 million increase in revenues from the sale of local
services which totalled $31.9 million from
$17.5 million for the same period in the prior year.
Revenues from the sale of local services for the nine months
ended September 30, 2001 increased $41.2 million or 106% to
$79.9 million from $38.7 million for the same period
in the prior year. The increase in local revenues resulted from
the increase in local lines in service. Revenues generated from
data services, which include collocation and Internet Data
Center hosting services, DSL and leasing of fiber-optic
capacity, totalled $13.6 million for the three month period
ended September 30, 2001, an increase of $6.8 million
over the same period in the prior year. Revenues for the nine
months ending September 30, 2001 from the sale of data
services increased over three times to $49.8 million from
$12.8 million for the nine months ended September 30, 2001
and 2000, respectively.

Retail long distance revenues increased to $16.8 million or
7% from $15.7 million for the three month periods ended
September 30, 2001 and 2000, respectively. For the nine
month period ended September 30, 2001, retail long distance
revenues decreased $3.5 million to $48.0 million from
$51.5 million for the same period in the period year.
Revenues from international wholesale traffic, decreased to
$14.0 million for the three month period ended September
30, 2001 from $22.2 million for the same period in the
prior year. For the nine months ended September 30, 2001,
international wholesale revenues decreased $17.0 million or
27% to $46.8 million from $63.8 million for the same
period in the prior year.

Costs of Services. Cost of services remained essentially
unchanged decreasing $0.6 million or 1% to
$47.9 million for the three months ended September 30,
2001 from $48.5 million for the same period in the prior
year. As a percentage of revenues, costs of services decreased
to 63% for the three months ended September 30, 2001 from
78% for the same period in the prior year. Costs of services
increased $21.9 million or 17% to $152.8 million for
the nine months ended September 30, 2001 from
$131.0 million for the same period in the prior year. As a
percentage of revenues, costs of services decreased to 68% for
the nine months ended September 30, 2001 from 78% for the
same period in the prior year.

Costs of services as a percentage of revenue is positively
impacted by a shift of services to local and data, which have
lower costs of services as a percentage of revenue from that of
long distance traffic. As the deployment of our local network
continues and more facilities become operational, the costs
associated with the co-location facilities, including rent and
access charges, are reflected in cost of services. These
facility costs are generally fixed and will result in
fluctuations in margin until this capacity is fully utilized.

Selling, General and Administrative. Selling, general and
administrative expenses increased $0.8 million or 3% to
$28.2 million for the three months ended September 30,
2001 from $27.4 million for the same period in the prior
year. As a percentage of revenues, selling, general, and
administrative expenses decreased to 37% for the three months
ended September 30, 2001 from 44% for the same period in
the prior year. Selling, general and administrative expenses
increased $11.0 million or 15% to $86.0 million for
the nine months ended September 30, 2001 from
$75.0 million for the same period in the prior year. As a
percentage of revenues, selling, general, and administrative
expenses decreased to 38% for the nine months ended
September 30, 2001 from 45% for the same period in the
prior year.

We employed 1,029 employees at September 30, 2001, compared
with 855 at September 30, 2000, resulting in an increase in
payroll and related expenses of $2.1 million and
$8.9 million for the three month and nine month periods
ended September 30, 2001. Other selling, general and
administrative expenses increased as a result of our growth in
revenues. Costs associated with the co-location facilities
including rent, access and leased line charges for facilities
which are not fully deployed are included in selling, general
and administrative

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The Company had a sales office located in the World Trade Center
and suffered the loss of that facility as a result of the events
of September 11, 2001. Employees have been relocated to
various facilities throughout New York and New Jersey. The
Company anticipates that substantially all of the loss will be
covered under insurance policies of the Company.

Depreciation and Amortization. Depreciation and
amortization expenses increased $12.4 million or 160% to
$20.2 million for the three months ended September 30,
2001 from $7.8 million for the same period in the prior
year. Depreciation and amortization expenses increased
$32.7 million or 171% to $51.8 million for the nine months
ended September 30, 2001 from $19.1 million for the
same period in the prior year.

The increase is due primarily to further investment in local
network facilities, fiber, computer and other telecommunications
and data services equipment to support our network expansion. We
expect the depreciation and amortization expense to increase as
we bring additional network facilities on-line, including fiber
routes, and as we make additional investments in our network and
operational infrastructure.

Interest. Interest expense net of interest income was
$8.7 million for the three months ended September 30,
2001. Interest income net of interest expense was
$1.0 million for the three months ended September 30,
2000, which resulted from the investment of capital obtained
from the common and preferred stock offerings in April 2000.

Interest expense, net of interest income, was $21.7 million
for the nine months ended September 30, 2001. Interest
income, net of interest expense, was $1.5 million for the
nine months ended September 30, 2000.

The increase in net interest expense is due to the amortization
of issuance costs of $3.4 million and $9.9 million
associated with borrowings under the Credit Facility during the
three and nine month periods ended September 30, 2001,
respectively. We expect interest expense to increase as the
Company continues to borrow under the Credit Facility.

Net Loss and Net Loss Applicable to Common Stockholders.
The contribution from increased revenues was offset by an
increase in selling, general and administrative expenses,
depreciation and amortization expense and interest expense,
which resulted in a net loss of $28.7 million and
$87.9 million for the three and nine months ended
September 30, 2001, respectively, compared to
$20.7 million and $56.9 million for the same periods
in the prior year.

The effect of the net loss combined with the preferred stock
dividends and accretion of offering expenses of
$1.9 million for the three months ended September 30,
2001 and $2.6 million for the three months ended
September 30, 2000 contributed to net losses applicable to
common stockholders, which were $30.6 million for the three
month period ended September 30, 2001 and
$23.3 million for the same period in the prior year. For
the nine month period ending September 30, 2001, preferred
stock dividends and accretion of offering expenses were
$7.3 million as compared to $4.8 million for the same
period in the prior year, contributing to a net loss applicable
to common shareholders of $95.2 million and a net loss
applicable to common shareholders of $61.7 million. There
were no dividends or accretion of offering expenses during the
first three months of 2000.

Earnings Before Interest, Taxes, Depreciation, and
Amortization (EBITDA). EBITDA was
$0.1 million for the three months ended September 30,
2001 versus a loss of $14.0 million for the same period in
the prior year. The EBITDA loss of $14.4 million for the
nine months ended September 30, 2001 improved from a loss
of $39.2 million for the same period in the prior year.
This improvement was due to increased contributions from
revenues that were partially offset by increased selling,
general and administration expenses.

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Liquidity and Capital Resources

Total assets were $433.2 million at September 30, 2001
compared to $404.7 million at December 31, 2000. Cash
and cash equivalents were approximately $4.0 million at
September 30, 2001 compared to $12.5 million at
December 31, 2000. Net cash used for operating activities
was $36.9 million during the nine months ended
September 30, 2001. Capital expenditures were
$91.8 million for the nine months ended September 30,
2001. In addition, we paid $14.5 million for fiber capacity
acquired in December 2000, during the nine months ended
September 30, 2001.

On September 27, 2000 we entered into a Senior Secured
Credit Facility as amended, (the
Credit Facility) with Goldman Sachs Credit
Partners, Fleet Securities, DLJ Bridge Finance and Fleet
National Bank. The Credit Facility provides up to
$225 million in total principal based on eligible
receivables, eligible net property and minimum interim amounts
as defined by the agreement. Borrowings under the Credit
Facility have been and are expected to continue to be used for
the purchase and acquisition of telecommunications assets and to
finance operating losses and working capital. Borrowings under
the Credit Facility are collateralized by substantially all of
the Companys assets. There were $144 million and
$160 million outstanding under this facility at
September 30, 2001 and November 1, 2001, respectively.

The Credit Facility imposes operating and financial restrictions
on us. Failure to comply with any of these restrictions,
including pre-established levels of revenue, earnings before
interest, taxes, depreciation, and amortization, or EBITDA, days
sales outstanding and access lines, could limit the availability
of borrowings or result in a default under the Credit Facility.
The restrictions in the Credit Facility affect, and in many
cases limit, among other things, our ability to pay dividends or
make distributions to our stockholders, incur additional
indebtedness, make investments or other restricted payments,
sell or dispose of assets, and take other actions that
management or our stockholders may consider beneficial.

Effective as of July 19, 2001 and August 10, 2001, a
Second and Third Amendment were made to the Credit Facility.
Included in the Second and Third Amendments were provisions
adjusting the EBITDA requirement for the fiscal quarter ending
September 30, 2001 and a waiver of the revenue covenants
for the fiscal quarters ending June 30, 2001,
September 30, 2001 and December 31, 2001, so long as
we meet specified alternative revenue requirements during each
of these fiscal quarters. These waivers expire on
January 1, 2002. If these amendments were not made, we
would not have been in compliance with the financial covenants
under the Credit Facility during the fiscal quarters ended
June 30, 2001 and September 30, 2001. In addition, the
Third Amendment limits the maximum borrowings available to the
sum of the lesser of (A)(i) 80% of eligible receivables,
(ii) 70% of eligible unbilled accounts and
(iii) eligible net property or
(B) (i) $155 million until five business days
following delivery by us to the lenders of financial statements
for the third quarter of 2001, and (ii) thereafter maximum
borrowings available under the Credit Facility are
$175 million until December 31, 2001,
$210 million until March 31, 2002 and
$225 million until June 30, 2002.

Our strategic initiatives include the deployment of additional
voice and data network equipment, fiber, the offering of new
local and data services, the expansion of our sales force and
other personnel, and significant investment in our information
technology systems. These initiatives will require a substantial
amount of capital for the installation of network equipment,
fiber, personnel additions and funding of operating losses and
working capital.

We currently anticipate that our available cash and borrowings
available under the Credit Facility will be sufficient to meet
our anticipated working capital and capital expenditure
requirement. In the event our operations are not profitable or
do not generate sufficient cash, or if we fail to comply with
the restrictions and obligations under the Credit Facility,
which could result in a default that could limit the
availability of borrowings under the facility, we may have to
substantially reduce our level of operations. In addition, we
may need to raise additional capital to meet our needs after
2001, to fund more rapid expansion, to develop new services, to
enhance existing services in response to competitive pressures,
and to acquire complementary services, businesses or
technologies. We are currently in negotiations to extend or
replace the Credit Facility and are considering alternative
sources of financing. However, we may not be able to obtain
additional financing on terms favorable to us, if at all. If
adequate funds are not available or are not available on terms

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Our estimates of future capital requirements and capital
availability are forward-looking statements within the meaning
of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The actual amount and timing of
our future capital requirements may differ substantially from
our estimates due to factors such as the costs of building the
mid-Atlantic region, capital requirements and growth
projections, cost overruns, changes in demand for our services,
regulatory, technological or competitive developments, and the
other factors identified under Certain Factors That May
Affect Future Operating Results.

Recently Issued Accounting Standard

In June 2001, the FASB issued SFAS No. 142, Goodwill
and Other Intangible Assets effective January 1,
2002. SFAS 142 requires, among other things, the cessation
of the amortization of goodwill. In addition, the standard
includes provisions for the reclassification of certain existing
recognized intangibles as goodwill, reassessment of the useful
lives of existing recognized intangibles, reclassification of
certain intangibles out of previously reported goodwill and the
identification of reporting units for purposes of assessing
potential future impairments of goodwill. SFAS 142 also
requires us to complete a transitional goodwill impairment test
six months from the date of adoption. We are currently assessing
the impact of this new statement on our consolidated financial
position and results of operations and have not yet determined
the impact of its adoption.

In October 2001, the FASB issued SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets effective January 1, 2002. SFAS 144
supersedes SFAS 121, Accounting for the Impairment of
Long-Lived Assets to be Disposed Of and provides a single
accounting model for long-lived assets to be disposed of. We are
currently assessing the impact of this new statement on our
consolidated financial position and results of operations and
have not yet determined the impact of its adoption.

Certain Factors That May Affect Future Operating Results

We had operating losses in the first three quarters of 2001 and
in each of the last five years and negative cash flow from
operating activities in the first three quarters of 2001 and for
the year 2000. We expect to incur significant expenditures in
connection with the continued acquisition, development and
expansion of our network infrastructure, product offerings and
information technology systems. As a result, we expect to incur
future operating losses. If our revenues do not increase
significantly or the increase in our expenses is greater than
expected, we may not achieve or sustain profitability or
generate positive cash flow in the future.

Our ability to meet our projected growth will require
substantial cash resources. The anticipated expansion of our
network infrastructure through 2001 and beyond, including the
addition of co-locations, switches, and other network elements,
will require additional capital. Our ability to satisfy future
capital needs will depend upon the continued availability of our
credit and equipment lease facilities and cash from operations.
If for any reason our Credit Facility otherwise becomes
unavailable or our ability to draw on this facility is limited,
including as a result of a breach by us of the financial or
other covenants contained in the Credit Facility, we will be
required to seek alternative financing, significantly reduce our
planned expansion and level of operations, or otherwise modify
our business plan. The maturity of our credit facility in
mid-2002 or upon an earlier default will also require additional
capital. Furthermore, if we acquire other businesses, we may
require additional financing. Additional financing may place
significant limits on our financial and operating flexibility,
may cause significant dilution to existing investors, or may not
be available as a result of the current unfavorable climate in
the economy generally and in the telecommunications sector in
particular. Failure to obtain future financing when needed or on
acceptable terms could cause us to delay or abandon our
development and expansion plans and could materially adversely
affect our growth and ability to compete.

Our Credit Facility imposes operating and financial restrictions
on us. Failure to comply with any of these restrictions,
including pre-established levels of EBITDA, days sales
outstanding and access lines, could limit the availability of
borrowings or result in a default under our Credit Facility. For
each of the year ended December 31, 2000 and the quarters
ended June 30, September 30, and December 31,
2001, the lenders

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We have a significant amount of indebtedness, and our
indebtedness will increase as we continue to draw on our Credit
Facility. Our ability to repay our indebtedness will depend on
our future operating performance, which will be affected by
prevailing economic conditions and financial, business and other
factors. Some of these factors are beyond our control. If we are
unable to service our indebtedness, we will be forced to examine
alternative strategies. These strategies may include reducing or
delaying capital expenditures, restructuring or refinancing
indebtedness or seeking additional debt or equity financing. We
can give no assurance that any of these strategies could be
effected on satisfactory terms.

As a result of the evolving nature of the telecommunications and
Internet industries, we may not be able to accurately forecast
our revenues. We do not believe that period-to-period
comparisons of our operating results are necessarily meaningful,
or that investors should rely upon them as indicators of future
performance. In one or more future quarters, our results of
operations may fall below the expectations of securities
analysts and investors. This would likely materially adversely
affect the trading price of our stock.

The markets for data services, including Internet access,
broadband data, web and managed server hosting and competitive
local service are in the early stages of development. We have
limited experience providing these additional services and can
give no assurance that our services will receive market
acceptance or that prices and demand for these services will be
sufficient to achieve or sustain profitable operations.

Our future operating performance will depend upon our ability to
implement and manage our growth effectively. Our rapid growth to
date has placed, and in the future will continue to place, a
significant strain on our administrative, operational,
managerial and financial resources. Failure to attract and
retain additional qualified sales and other personnel, including
management personnel who can manage our growth effectively, or
failure to successfully train or integrate such personnel, could
materially adversely affect our future operating performance. To
manage our growth effectively, we will also have to continue to
improve and upgrade operational, financial and accounting
information systems, controls and infrastructure, as well as
control costs and maintain regulatory compliance. Failure of our
systems to perform as expected could have a material adverse
effect on us.

Prices for telecommunications and data services have fallen
historically, a trend we expect will continue. Accordingly, we
cannot predict to what extent we may need to reduce our prices
to remain competitive or whether we will be able to sustain
future pricing levels as our competitors introduce competing
services or similar services at lower prices.

We rely on other companies to supply certain key components of
our network infrastructure, including telecommunications
services, Internet services, network capacity and switching and
networking equipment, which, in the quantities and quality
demanded by us, are available only from sole or limited sources.
We are also dependent upon incumbent local exchange carriers and
other carriers to provide telecommunications services and
facilities to us and our customers and upon third parties for
other services. Many of these companies are or may become our
competitors. There can be no assurance that we will be able to
obtain such services or facilities on the scale and within the
time frames required by us at an affordable cost, or at all.

We may acquire other businesses that we believe will complement
our existing business. These acquisitions will likely involve
risks such as the difficulty of assimilating the acquired
operations and personnel, the diversion of resources and the
risks of entering markets in which we have little experience.
These transactions may be required for us to remain competitive.
We can give no assurance that we will be able to obtain required
financing for such transactions or that such transactions will
occur.

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Our industry is highly competitive, and we expect competition to
intensify in the future. We do not have a significant market
share in any of our markets. Most of our actual and potential
competitors have substantially greater financial, technical,
marketing and other resources, including brand or corporate name
recognition, than we do.

The telecommunications industry has been, and is likely to
continue to be, characterized by rapid technological change,
frequent new service introductions and evolving industry
standards. Increases or changes in technological capabilities
could harm our competitive position.

Telecommunications services are subject to significant
regulation at the Federal, state, local and international
levels. Delays in receiving required regulatory approvals or the
enactment of new legislation or regulations could have a
material adverse effect on us. In addition, future governmental
actions could alter competitive conditions in the markets in
which we are operating or intend to operate in ways that are
materially adverse to us.

Interruptions in service, capacity limitations or security
breaches on our network or the networks on which we depend could
have a material adverse effect on our reputation and competitive
position.

See also the Risk Factors contained in our Annual Report on
Form 10-K for the year ended December 31, 2000.




Item 3.     Quantitative and
Qualitative Disclosures About Market Risk

The Company is exposed to market risk from changes in the
interest rate related to our Credit Facility, which is based
upon either the Prime Rate or LIBOR Rate, each of which is a
variable interest rate. Assuming an average borrowing level of
$144.0 million (the amount borrowed under all revolving credit
facilities as of September 30, 2001) each 1 percentage
point increase in the applicable interest rate would result in
$1.4 million of additional annual interest charges.

In September 2001, the Company entered into an interest rate
swap agreement that converted a portion of its debt from
variable to fixed rates in order to minimize the effect of
changes in interest rates on earnings. Under the swap agreement,
the Company pays a fixed rate of 3.78% based on a three-month
U.S. dollar LIBOR rates. The notational principal amount of
the interest rate swap agreement outstanding was $5 million at
September 30, 2001. See Note 5 in the accompanying
notes to the unaudited condensed consolidated financial
statements. The Company does not believe there is a significant
risk related to its interest rate agreement since the Company
continually monitors the credit ratings and limits the financial
exposure and the amount of the agreement entered into with any
one financial institution.






PART II  OTHER INFORMATION





Item 1.     Legal
Proceedings

The Company, certain of its current and former officers and
directors and certain of the underwriters in its initial public
offering have been named as defendants in three class action
lawsuits, Werman et al. v. Network Plus Corp. et al, which was
filed in U.S. District Court for the Southern District of
New York on July 3, 2001, Grewal et al v. Network Plus
Corp. et al, which was filed in U.S. District Court for the
Southern District of New York on July 19, 2001, and Masidzg
et al v. Network Plus Corp. et al, which was filed in U.S.
District Court for the Southern District of New York on
August 28, 2001. These class action lawsuits are similar to
over 200 others filed recently against companies that went
public between 1998 to 2000. Network Plus believes the claims
against it and its officers and directors are without merit and
intends to defend them vigorously.

The complaints allege violations of Sections 11, 12(a)(2)
and 15 of the Securities Act of 1933 and Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder. The complaints allege that the
Prospectus for the Companys initial public offering of
Common Stock in June 1999 was materially false and misleading
because it failed to disclose, among other things, the following
allegations made by plaintiffs: (i) that Goldman Sachs,
Bear Stearns, Credit Suisse First Boston, Merrill Lynch, Lehman

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Item 6.     Exhibits and Reports
on Form 8-K


(a)  Exhibits

No exhibits are filed herewith.

(b)  Reports on Form 8-K

The Company did not file any reports on Form 8-K during the
three months ended September 30, 2001.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in
Randolph, Massachusetts, on November 13, 2001.



| |                   
| | ------------------
| | NETWORK PLUS CORP.



| |     |                     
| | --- | --------------------
| | By: | /s/ROBERT J. COBUZZI

| |                                             
| | --------------------------------------------
| |                                             
| | Robert J. Cobuzzi                           
| | Executive Vice President,                   
| | Chief Financial Officer and Treasurer       
| | (Principal Financial and Accounting Officer)

19